Down payment
The portion of a home’s purchase price paid up front in cash rather than borrowed, usually expressed as a percentage of the price.
What it means
The down payment is the buyer’s upfront stake in a home. The rest of the price is financed with a mortgage. Required minimums depend on the loan type: some government-backed loans allow zero down for eligible borrowers, FHA loans allow 3.5% with a qualifying score, and many conventional loans allow less than 20%.
A larger down payment shrinks the loan, lowers the monthly payment and total interest, and can earn better pricing. On conventional loans, putting down at least 20% generally avoids private mortgage insurance. The tradeoff is tying up cash that could otherwise serve as an emergency fund or go toward moving costs and repairs.
Example
For example, 20% down on a $350,000 home is $70,000, leaving a $280,000 loan. At 10% down, the buyer pays $35,000 and borrows $315,000, and would likely pay PMI on a conventional loan.
How it’s used
- Planning how much to save before buying
- Choosing between loan programs
- Reducing the monthly payment or avoiding PMI
Good to know
- Budget for closing costs and a cash cushion on top of the down payment.
- Some state and local programs offer down payment assistance; rules vary by area.
See it in the data: The median home price since 1980 →
Related terms
Educational information only, not financial, tax or legal advice. Rules, limits and rates change; check the IRS, your lender or plan, or a qualified professional before acting.